Canadian small- and medium-sized businesses (SMBs) are more often than not now leveraging e-commerce, reveals new data from PayPal.
According to PayPal, small businesses that sell online through the online payment service grew 22% year-over-year in 2017, in contrast to offline small businesses, which saw less than 1% growth year-over-year in 2016.
PayPal Canada analyzed online transaction data from 4,000 Canadian small businesses that use its platform. The insights reveal that international trade opportunities previously pursued mainly by bigger retailers are now much more accessible to small businesses through e-commerce. Encouragingly, the data show that small businesses in the country are now targeting foreign markets. Nearly 30% of digital small businesses that export goods and services do so to three countries or more.
"In today's competitive world, small businesses need access to digital tools that open them up to global audiences," says Paul Parisi, President, PayPal Canada. "With a deep dive into our data, it's heartening to see that our small business customers are digitizing their businesses to grow and sell internationally. For Canada to be a more vibrant and inclusive economy, we need the vast majority of small businesses to embrace digital commerce capabilities because that's where the world is shifting."
The accessibility of e-commerce solutions, says PayPal, enables small businesses to access foreign markets and trade opportunities. These export opportunities are global, as e-commerce allows Canadian businesses to diversify trade partners outside of the United States and Mexico.
More than 63% of digital small businesses export their goods and services. In 2014, about 12% of Canadian SMBs engaged in international trade.
Digital small businesses that exported their goods and services experienced 3% more growth between 2016 and 2017 than non-exporting digital small businesses.
Nearly 30% of exporting digital small businesses sell to three countries or more.
The United States and Mexico are two of the top-10 trade corridors for Canadians businesses. In addition, businesses that use PayPal are exporting beyond North America and selling into China, Australia, Japan and the UK, among over 80 other international markets.
"In our global economy, it's crucial that Canadian businesses reach new markets, so they are able to continue to grow," says Mary Ng, Minister of Small Business and Export Promotion. "Access to e-commerce means international trade opportunities aren't limited to just large companies. Small businesses have greater potential than ever to play a part in Canada's growth on the world stage."
PayPal's proprietary data also reveals potential for e-commerce to support small businesses located in areas outside of urban centres. Eighty-one per cent of Canada's population lives in urban regions, and as a result, urban small businesses have traditionally had more access to customers and higher growth rates.
Digital small businesses located in rural parts of Canada grew 18.5% between 2016 and 2017, while urban businesses grew at 21.3%. Suburban businesses saw the highest rates of growth at 46.5%, year-over-year.
Digital small businesses in Nova Scotia saw 47% growth year-over-year from 2016 to 2017, while businesses in Manitoba saw 30% year-over-year growth. In Ontario, businesses saw 26.2% year-over-year growth in the same period.
In Saskatchewan, these trends are even more pronounced. Exporting digital small businesses grew over 10% faster than non-exporters, and almost 40% of exporters reach more than three markets.
It's clear that technology can accelerate growth for small businesses, which make up 98% of all Canadian businesses. Despite this, only one in five Canadian businesses sell online, demonstrating that there is still untapped potential for small business growth.
"At PayPal, our goal is to work with partners from across the public, private and social sectors so we can democratize access to affordable tools that will enable Canadian businesses of all sizes to grow and thrive, fostering a vibrant economy and a more diverse and inclusive world," adds Parisi.
These proprietary insights come from an analysis of over 4,000 small businesses in Canada, defined as those that sold between $30,000 and $3 million online per year using PayPal from 2016 to 2017, and referred to as digital small businesses. This small business dataset was fully anonymized and includes no personally identifiable information. PayPal has more than 250,000 small business customers in Canada.